Directors' remuneration report

(f) Pensions

(i) UK executive directors
UK based executive directors (the Group Finance Director and the Chief Executive of the UK division) are members of the UK Group Scheme, which is a funded, HMRC registered, final salary, occupational pension scheme with a separate category of membership for directors. Pensionable salary is the member's base salary, excluding all bonuses.

The main features of the directors' category are:

  1. (i)

    a normal pension age of 60;

  2. (ii)

    pension at normal pension age of two-thirds of final pensionable salary, subject to completion of 20 years' service;

  3. (iii)

    life assurance cover of four times pensionable salary; and

  4. (iv)

    spouse's pension on death.


All UK Group Scheme benefits were, until 5 April 2006, subject to Inland Revenue limits. Where such limitation was due to the Inland Revenue earnings cap the Signet Group Funded Unapproved Retirement Benefit Scheme (the "FURBS") was, until April 2006, used to supplement pension benefits. This was a defined contribution arrangement.

As a result of the changes to pension taxation in the UK from 6 April 2006 the Remuneration Committee agreed that pension provision through the UK Group Scheme should continue broadly as before. However members should not benefit from a windfall gain through the removal of existing limits, and therefore a scheme specific earnings cap was maintained equivalent to the previous earnings cap, increased by RPI annually. As the tax treatment of the FURBS and the other advantages of such a funding scheme have been eroded, the Group has ceased paying contributions to the FURBS. In substitution a supplement is paid to the member on the same basis as with other elements of remuneration: on an individual basis and in accordance with the remuneration principles. After review the Remuneration Committee agreed that it was necessary to increase the supplement paid to executive directors in order to achieve the appropriate positioning within the percentile ranges forming part of the remuneration principles. The Remuneration Committee has therefore taken the first steps to redress that balance during 2007/08. The Group will not compensate members for any increase in taxation that they may face as a result of the changes and members will not be protected by the Group from the consequences of the changes in taxation, but will be provided with a cash supplement in lieu of pension accrual once members reach the Lifetime Allowance limit set by the new legislation if they choose to exercise this option. The UK Group Scheme does allow for the new range of flexibility in pension arrangements without additional cost or administrative burden and for example, the new flexibility on tax-free cash has been incorporated.

(ii) US executive directors
In the US there are two savings vehicles by which provision for pension payments is made: the Sterling Jewelers Inc. 401(k) Retirement Savings Plan (the "401(k) Plan") and the Deferred Compensation Plan (the "DCP"). These are defined contribution arrangements.

In the US division the primary retirement vehicle is the US company sponsored 401(k) Plan which is a qualified plan under Federal guidelines. The company matches employee contributions to the 401(k) Plan at 25% of an employee's contribution up to a maximum of 6% of an employee's basic salary. Under Federal guidelines the 401(k) Plan contributions by senior management may be reduced based on the participation levels of lower paid employees. Consequently, in a similar way to other US companies, a supplemental plan, the DCP, has been established for senior management to assist with pre-tax retirement savings.

The DCP, which was established in 1996 as an unfunded non-qualified plan under Federal guidelines, is therefore considered to be an important savings vehicle in addition to the 401(k) Plan. The employer makes a matched contribution to the DCP equal to 50% of an employee's contribution up to a maximum of 10% of the individual's basic salary and bonus.

The Group Chief Executive has pension benefits provided via the 401(k) Plan and the DCP. The DCP rules allow for individual contractual matching arrangements without any effect to its tax beneficial status and at present the only contractual contribution matching arrangement is with the Group Chief Executive which provides for a contribution equal to 20% of basic salary without any deferral being required.

The Chief Executive of the US division is a member of the 401(k) Plan and the DCP. The DCP provides a contribution on a matched basis equal to 50% of the maximum of 10% of base salary and bonus.

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